Business owners are well aware of
how expensive defending themselves in a lawsuit can be, and that the proper insurance can lessen the burden. What they may not know is that
more than half of all corporate claims are
brought by employees, making Employment Practices Liability Insurance (EPLI)
a specialized form of coverage that’s
worth investigating.
Alfonso Galvez, commercial insurance
broker with Westland Insurance Brokers,
points out that EPLI is often an afterthought for employers.
“Generally, people are so busy building
their business, they lose sight,” says
Galvez, a 20-year veteran of commercial
insurance. “People are concerned about
maybe the theft of a computer or a fire
that might happen in their facility. But
one of the most common claims that can
occur would be an employee-related
claim.”
Smart Business spoke to Galvez about
the role EPLI plays in protecting a company’s assets in the event that it’s the target of a work-related lawsuit.
What is EPLI and what kinds of claims does
it cover?
It’s specialized insurance coverage that
protects employers against claims in
work-related lawsuits. It includes
wrongful termination, harassment and
discrimination based on age, race and
gender.
There’s also an option to purchase
third-party discrimination and harassment insurance. For instance, in a retail
store a patron may feel like he or she is
being discriminated against because of
race. Or it could be a situation where
you have a manufacturing company and
perhaps a vendor pays a visit and the
receptionist harasses that individual.
These are examples of third-party claims
as opposed to claims that take place
within the work force of a particular
company.
Other employment-related suits that
may be brought against an employer and
are included in this type of policy are
breach of an employment contract, negligent evaluation, wrongful discipline
and mismanagement of employee benefit plans.
Who should consider EPLI?
I believe that every company should
have this coverage in force. Companies
that are most vulnerable are generally
small- to mid-size companies. They may
not have either the necessary capital to
defend themselves against an employment-related suit or other resources,
such as a human resources manager
who is current with rapidly changing
employment policies.
What kinds of expenses does EPLI cover?
Among the costs that are covered in an
EPLI policy are such things as judgments that are handed down in court. It
also includes coverage for general
expenses to discover what the alleged
claim is or what occurred. Also included
are legal expenses, which — particularly
in California — can rise rapidly.
How does a company assess its risk for
employee-related claims?
It’s determined by the type of company
it is, how many employees it has, and if
it’s had any past claims history. It also
depends on whether or not the company
has instituted any kind of employment
policies and procedures. It’s really important that the company have an actual
employee handbook and policy manual
to help reduce the likelihood of a claim.
Does employment law affect EPLI?
Yes, it really does. One of the challenges that most companies have is trying to stay current with all the changes
in state and federal employment-related
laws. That’s why it’s especially important
to have this kind of coverage because it
adds another layer of protection in the
event something changes of which a
company is not aware.
What else can EPLI coverage provide a
company?
One of the newest features of many
Employment Practices Liability policies
is that insurance companies include free
legal hotline assistance. A number of
insurance companies provide a set period of prescribed time to call a designated
law firm to ask questions about either
employment law or a situation that has
arisen within your company.
You can also get what is referred to as
loss-control services. This provides
assistance with the information you can
include in your employee handbook and
policy manual. For instance, you would
include information related to zero tolerance in the workplace and state in the
handbook how you would handle a
report of an alleged harassment or discrimination incident.
Some policies also provide you the
option of choosing your own counsel and
therefore having more control over the
defense and settlement of your claim.
ALFONSO GALVEZ is a commercial insurance broker with Westland Insurance Brokers. Reach him at (949) 862-3323 or
[email protected].
